Completed acquisition by Arriva plc of certain assets of K.M.P. (Llanberis) Limited

Affected market: Local bus services in north west Wales

No. ME/3769/08

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 22 given on 6 November 2008. Full text of decision published 18 November 2008.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.

PARTIES

Arriva Cymru Limited (Arriva) is part of the bus business of Arriva North West Limited (known as Arriva North West and Wales) which is a wholly owned subsidiary of Arriva plc. Arriva plc is one of the UK's largest bus companies with operations in various locations throughout the UK.

K.M.P. (LLanberis) Limited (KMP) is a family run bus business in North Wales. KMP has a depot in Llanberis and operates 34 vehicles. KMP employs 28 drivers, three mechanics and five other employees. The annual turnover of KMP is around £2 million.

TRANSACTION

The acquisition by Arriva of certain assets of KMP completed on 3 August 2008. The assets acquired were:

• seven buses
• the commercial bus service number 9A and 9B, which operate between Llandudno and Llangefni and between Llandudno and Caernarfon
• the goodwill of the acquired assets, and
• the commercial information related to the business.

In addition to these assets, five employees transferred to Arriva. Consequently the OFT considers that the acquired assets constituted an enterprise within the meaning of section 129 of the Enterprise Act 2002 (the Act).

The Office of Fair Trading's (OFT) statutory deadline for deciding whether to refer the merger to the Competition Commission (CC) is 3 December 2008. The OFT's administrative deadline expired on 22 October 2008.

JURISDICTION

As a result of this transaction Arriva and the enterprise acquired from KMP have ceased to be distinct. Pre-merger, the parties were the sole suppliers of bus services from Llandudno to Bangor and Bangor to Llangefni in north west Wales. The share of supply test in section 23 of the Act is therefore met [see endnote 1]  and the OFT believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

The OFT received comments from four customers concerned about the changes in frequency, inconvenience that the merger will create for some passengers, increase in fare prices or the quality of Arriva's services. The OFT also received comments from three competitors concerned about the difficulty of entry against Arriva and the general difficulty of competing against Arriva, including Arriva's alleged tendency to predate on its competitors.

ASSESSMENT

The merging parties overlap in the provision of commercial bus services on three flows in North Wales: Llandudno-Bangor, Bangor-Llangefni and Bangor-Caernarfon.

Post-merger, Arriva is currently the only provider of bus services to the end points of the flow on the Llandudno-Bangor and Bangor-Llangefni flows, and has a market share on parts of all three overlap flows ranging from 65 per cent to 100 per cent.

While there is some doubt over the extent of competition between the parties on the overlapping flows pre-merger due to several - in some cases significant - differences in each party's services (in particular, journey time and price), the OFT cannot exclude that the merger has had an adverse impact on the services provided by Arriva post-merger, including some price rises (as a result of Arriva aligning KMP's prices to those of its own) and some service reductions.

However, the OFT considers that barriers to entry and expansion in this particular case are low. Furthermore, one firm, Express Motors, has recently expanded its services on one of the overlap routes and another, [  ], is planning to enter or expand on the other two overlap routes in the near future. [  ] The OFT therefore considers that the combination of low barriers to entry, the existence of a number of equally sized or larger potential competitors (than that of KMP), and specific evidence of actual expansion post-merger from one competitor, and of intentions to enter from another competitor is sufficient to address any potential substantial lessening of competition arising from the merger.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

1. The share of supply test is satisfied on the basis that the parties overlap in the supply of bus services in North Wales and will have a post-merger share of supply of over 64 per cent.

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